The game re-tells the story of the original Fatal Fury video game. It introduces Toji Sakata and Tsugumi Sendo to the series, and places Mai Shiranui, Kim Kaphwan, and Li Xiangfei as participants of the original King of Fighters tournament. Ryuji Yamazaki also appears as a mid-boss character and Ryo Sakazaki makes an appearance as Mr. Karate, tying the events of Art of Fighting 2 to this game.
Fatal Fury: Wild Ambition is a 3D fighting game. However, the gameplay is similar to that of a 2D fighting game. The button layout for controls are similar to Real Bout Fatal Fury 2, but now includes a new move called the Axis Shift. This feature allows players to move their characters left or right using 3D movement. Characters attack using punches, kicks and heavy attacks. Every character also has an assortment of Special Moves and Desperation Moves (now called Super Power Attacks). Super Power Attacks can be performed only when the player's Health Meter is flashing red and does not use the Heat Meter.
Much like in Real Bout Fatal Fury 2, players are able to perform throws, counterattacks and pursuit attacks; they can also taunt and recover quickly after being knocked out.
Fatal Fury: Wild Ambition replaces the Power Meter from Real Bout Fatal Fury 2 with the Heat Meter. The Heat Meter starts at 50% full at the beginning of every match, although it can change between rounds of the same match. Players fill the meter by attacking or taunting their opponent, but taking damage or being thrown decreases the gauge. If a player takes damage but their opponent stops attacking them, the meter will rise to 50% again. When the player fills the Heat Meter, the message "MAX OK" will appear. Players may then perform an Overdrive Power or a Heat Blow. The Heat Meter will be close to empty if either move is used; this can also happen if the player takes too much damage or performs numerous counterattacks. If this happens, a Danger message will appear. If a player takes too much damage with a nearly empty Heat Meter, the player will overheat. This causes the player to get dizzy, becoming vulnerable to the opponent's attack.
A new feature introduced in Fatal Fury: Wild Ambition allows a player to block an attack at the moment it hits, which causes no damage, while the offensive opponent is pushed away.